Legal Question in Business Law in California

Re: Breaches of LLC - fraud?

You may have a claim against the managing partner and LLC. We would have to reviwe the contract and documents you have. Please call if if you have any other questions.

Re: Breaches of LLC - fraud?

This is too complicated and there is too much money at stake for the investors to provide an answer in this forum. Please call.

Re: Breaches of LLC - fraud?

First, I need to advise you that there are statutes of limitations for lawsuits; generally, a suit for fraud must be brought within three years of when the fraud was discovered or reasonably ought to have been; for written contracts, the limit is four years from the date of breach. Your tolerance of the misconduct for this many years MAY serve to cut off some of your claims, either as to the grounds of complaint, amount you can now recover, or both. Therefore, you should act promptly to sue, so your unrecoverable loss doesn't increase.

Having said that, there may be legal theories under which you can obtain an accounting and a judgment for all past years' profits due you. This is based on the concept that an LLC can reinvest earnings, so that past failures to pay them out are neither breaches of contract nor fraud, but merely a perhaps misguided fiscal policy. Then, you sue to oust management and/or dissolve the LLC, if grounds exist (and they probably do), and claim what's owed you out of the liquidation proceeds.

The first step would be to determine whether the LLC has filed termination papers, is suspended, or still active according to the Secretary of State's records. Termination, by the way, does not make it impossible to sue the LLC or its managers. In fact, it may give additional grounds for suit.

I have just refreshed my acquaintance with the law governing unhappy break-up of LLCs, having brought an action for fraud, breach of fiduciary duty and contract, and other charges against LLC managers who tried similar tricks in a real-estate development deal. I don't see a Zip code on your question, but I'm in the Bay Area and this suit is in Southern California, so I can handle a case almost anywhere in the state. Contact me with details if interested.

Re: Breaches of LLC - fraud?

This is a securities law violation among other things. You really need to get an attorney. There are fraud issues as well as breaches of fiduciary duties. Do you have an operating agreement? I have a similar case in riverside county right now.